EUR/USD has returned to 1.09. Economists at ING analyze the pair’s outlook.
Adverse short-term rate spread
Markets are now pricing in a first ECB cut in April, and further dovish repricing will become harder from this point on. However, that won’t be necessary to put pressure on EUR/USD if short-term differentials reconnect with the pair.
The 2-year EUR-USD swap spread is now at 178 bps the lowest since December 2022, when EUR/USD was at 1.05.
See: The coming monetary policy phase should be rather favorable for EUR – Commerzbank
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